DO I CHARGE QST TO GOVERNMENT AGENCIES OR MUNICIPALITIES?

Many Quebec businesses sell services or products to government agencies, municipalities, ministries, school boards, CISSS/CIUSSS, or public corporations. A common point of confusion is whether these entities must pay QST and GST on invoices. Some government bodies are tax-exempt, some pay tax but later recover it, and others are fully taxable like regular businesses. Charging or not charging tax incorrectly can delay payments, trigger invoice rejection, or lead to compliance issues.

This guide explains exactly when you must charge GST and QST to government clients and how to invoice them properly.

LEGAL AND REGULATORY FRAMEWORK

The rules governing tax on government sales come from:

• Excise Tax Act (GST)
• Quebec Taxation Act (QST)
• Public Service Body (PSB) Rebate legislation
• Treasury Board directives and procurement rules

Key principle:

Government organizations pay GST/QST like any other entity unless a specific exemption applies.

Most rebates happen after payment, not at the supplier level.

KEY COURT DECISIONS

Courts have ruled that:

• suppliers must charge GST/QST to government entities unless exempt
• government bodies claiming rebates cannot demand tax-free invoices
• invoicing without tax when tax applies results in supplier liability
• PSB rebates do not affect supplier obligations

These decisions confirm that suppliers must follow standard tax rules.

DO YOU CHARGE QST (AND GST) TO GOVERNMENT AGENCIES?

Here is the clear breakdown.

1. FEDERAL GOVERNMENT (Canada)

Federal departments and agencies (e.g., CRA, Service Canada, Transport Canada) are:

GST-exempt

QST-exempt

You do not charge GST or QST on invoices to federal ministries.

However:

• some federal bodies (like Crown corporations) may be taxable — check contract terms.
• you may still need to include your tax numbers on invoices.

2. QUEBEC PROVINCIAL GOVERNMENT

Provincial ministries and departments (e.g., Santé Québec, Education, Transport Québec):

Pay GST and QST

You must charge both taxes.

These bodies later claim public service body (PSB) rebates, so suppliers must invoice normally.

Examples of provincial entities that pay GST/QST:

• Ministère de la Santé
• Ministère de l’Éducation
• Ministère des Transports
• CNESST
• SAAQ
• Revenu Québec

3. MUNICIPALITIES IN QUEBEC

Cities and towns pay GST and QST on purchases, including:

• City of Montreal
• City of Laval
• Ville de Québec
• borough offices
• municipal departments
• municipal public works divisions

Municipalities later recover a portion via PSB rebates, but suppliers must charge tax.

4. SCHOOL BOARDS (CSS / English school boards)

School boards and service centres:

Pay GST and QST

• Centre de services scolaire (CSS)
• English Montreal School Board (EMSB)
• Lester B. Pearson School Board

Again, rebates apply to them — not to you.

5. HEALTH AGENCIES (CISSS, CIUSSS, hospitals)

Health institutions:

Pay GST and QST

You must invoice tax normally for goods and services supplied to:

• hospitals
• CLSCs
• rehabilitation centres
• senior care facilities

These institutions later recover amounts via rebates.

6. PUBLIC SERVICE BODIES (PSBs)

PSBs include:

• municipalities
• school boards
• universities
• colleges
• non-profit organizations
• charities
• hospital authorities

PSBs generally pay tax and later claim rebates (not exemptions).

Exception: Charities and some NPOs may be exempt for specific supplies, but this does not apply to government agencies.

7. CROWN CORPORATIONS

Different rules apply:

Some Crown corporations are taxable

Ex:
• Hydro-Québec
• VIA Rail
• Canada Post (for certain supplies)

Some Crown corporations are exempt (federal level)

Ex:
• certain federal boards/commissions

Always check contract terms.

8. INDIGENOUS GOVERNMENTS AND FIRST NATIONS BODIES

Special rules sometimes apply on reserve-based transactions, but NOT to:

• Quebec municipalities
• Quebec government
• federal departments (GST/QST exemptions exist separately)

Suppliers must confirm eligibility before applying exemptions.

HOW TO INVOICE GOVERNMENT AGENCIES PROPERLY

Your invoice should include:

• your business name
• GST number
• QST number
• purchase order (PO) number
• detailed description of goods/services
• taxable amount
• GST (5%)
• QST (9.975%)
• total amount payable

Exception: Federal government invoices show no tax.

COMMON MISTAKES BUSINESSES MAKE

• assuming all government entities are tax-exempt
• removing GST/QST because the client “asked”
• invoicing the federal government with tax
• failing to include PO numbers (leading to delayed payment)
• misunderstanding PSB rebates
• not verifying whether the client is provincial or federal
• charging GST only but forgetting QST

These mistakes cause invoice rejection or tax liability.

HOW TO VERIFY IF A GOVERNMENT CLIENT IS TAX-EXEMPT

Ask for:

• exemption certificate (rare for government)
• written confirmation
• contract specifying tax treatment
• CRA ruling (for federal-specific exemptions)

Never rely on verbal assurances.

MACKISEN STRATEGY

Mackisen CPA helps businesses correctly charge GST/QST when selling to government bodies. We:

• determine whether the government entity is federally or provincially taxable
• set up tax rules in your accounting/POS system
• review contracts for tax clauses
• prepare compliant invoices
• correct past invoicing errors
• assist with adjustments and remittances

Our guidance protects your business from refund issues and assessment risks.

REAL CLIENT EXPERIENCE

A consulting firm charged tax to the federal government in error. Mackisen corrected invoicing and prevented financial loss.

A contractor removed QST for a municipality at the client’s request. Mackisen corrected the invoice and clarified PSB rebate rules.

A software provider wasn’t charging QST to hospitals. Mackisen fixed the issue and adjusted returns accordingly.

COMMON QUESTIONS

Do provincial ministries pay QST?
Yes always.

Do federal departments pay QST?
No they are exempt.

Do municipalities pay sales tax?
Yes, they pay GST/QST but recover part through rebates.

Is it illegal to remove QST because a client “doesn’t want to pay”?
Yes suppliers must follow the law, not client preference.

WHY MACKISEN

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps Quebec businesses apply correct GST/QST rules when dealing with government agencies. Our expertise ensures compliant invoicing, on-time payments, and complete protection from reassessment.